ByAngela Colley, ContributorSeptember 29, 2012

Steve Boers takes his two dogs, Manny and O'Tool, for a run in Ankeny, Iowa in this August 2012 file photo. Getting rid of a gym membership and running outside, for free, is one step the author took in improving her finances.

In a recent study conducted by the American Payroll Association, 68 percent of the 30,600 people surveyed said it would be somewhat or very difficult if their paycheck was a week or more late. In other words, more than two-thirds of Americans are living paycheck to paycheck.

It’s a lifestyle I know all too well. I lived paycheck to paycheck for years, sometimes running out of cash days before my next payday. I spent too much and racked up debt. My entire financial safety net was the $50 minimum required to keep my savings account open.

My game-changing moment came when my paycheck bounced and the financial tightrope I was walking on snapped. I had to borrow money from family to keep from being evicted. I knew I was going to have to change something to keep that from happening again.

1. Adjust your attitude

For some, living paycheck to paycheck can be a lifestyle choice. In my case, I chose to ignore my financial reality and live beyond my means, so I never got ahead. To help myself change my attitude toward money, I made a list of goals and rewards:

Pay off debts to improve my credit score so I could one day own a home

Build an emergency fund so I could start saving for fun things like a vacation

Stop wasting money on little things I didn’t need so I could buy bigger things I did need later on

Creating a vision of what I could have in the future made it easier to make better financial choices.

2. Create a savings-friendly budget

Surprisingly, I had a budget, but it was a horrible one that only accounted for my living expenses. It looked something like this:

Monthly income – $1,800

Rent – $750

Utilities – $85

Cell phone – $85

Internet – $45

Remainder – Spend on whatever!

I didn’t budget for any of life’s other necessities like toilet paper and food, and I didn’t plan for the future. As a result, I paid my bills, put the minimum amount due toward my credit card, and wasted the rest of my income.

To meet my goals (and realize my vision), I needed a better budgeting system. So I created one that included every purchase I made in the month – like groceries, personal care products, dog food, and the little extras. And then I included putting money into savings. For years now, I’ve put 10 percent of my income into my savings account automatically. It’s part of my budget, just like rent or car insurance.

3. Track spending

Once I had a detailed budget, I figured my financial situation would improve – and it did. But I still found myself running out of money every month. Curious as to why, I saved every receipt for a month. At the end of the month, I added it all up by purchase and realized I was spending far more than I thought. All of those $2 purchases here and there, running to the store to get one thing I forgot, or buying a pricey latte were killing my budget.

Since I realized I could easily go over budget, I’ve kept track of my spending. Now I use online budgeting software like Mint to automatically see where my money goes, and I haven’t gone over my budget in years.

4. Trim the fat

Once I got my spending under control and had some money set aside for emergencies, I started focusing on one of my bigger goals – paying down my credit card debt. I figured out how much I owed, about $2,500, and set a one-year goal date to pay it off by. To do so, I was going to have to come up with about $210 a month to pay toward my credit card.

To get what I needed, I trimmed some things I really didn’t need or even use that often out of my budget. Here is what I cut:

Cable TV – $65

Gym membership – $45

3 magazine subscriptions – $33

Monthly hair color at a salon – $85

Now I watch Netflix, take my dog for a run every day, read blogs, and keep my hair my natural color. I don’t miss any of it, and I was able to pay off my debt in a year. The following year, I started putting that extra money into my “vacation funds” account. Trust me, seeing my favorite bands at South by Southwest in Austin, Texas, was better than sitting in my living room reading Cosmo.

5. Don’t trade life experiences for money

Living in New Orleans, it was just accepted that if I went out, I had to spend a ton of money. Every weekend my friends and I ate at a nice restaurant, or bought concert tickets, or racked up a hefty bar tab. I was new to being on my own and thought spending hundreds a month on social activities was just what adults did.

I thought I was going to have to sit alone in the dark every night to save money. So when the weekend rolled around, I told a friend that I needed to start saving money and she said, “Me too!” That is when it hit me. Most people don’t love being broke. And maybe if we had something cheaper to do, we could all save some money.

So I went to my city’s tourism center and made a list of every free activity I could find. I found free concerts, firework shows, festivals, parks, and museums. Now my friends and I still go out every weekend. I still buy the occasional ticket to see the Saints play or eat at a nicer place, but most of our activities are free.

The bottom line: I didn’t give up my life experiences just to save a buck. I still have fun.

It wasn’t easy to stop living paycheck to paycheck, but the way I did it can work for anyone. You just need a vision – and of course, a little sound advice never hurts.

Angela Colley is a writer for Money Talks News, a consumer/personal finance TV news feature that airs in about 80 cities and around the Web. This column first appeared in Money Talks News.

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